Ilyia v. El Khoury et al, No. 2:2011cv01593 - Document 178 (W.D. Wash. 2013)
Court Description: ORDER denying dft's 129 Motion for Summary Judgment by Judge Robert S. Lasnik.(RS)
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Ilyia v. El Khoury et al Doc. 178 1 2 3 4 5 6 UNITED STATES DISTRICT COURT WESTERN DISTRICT OF WASHINGTON AT SEATTLE 7 8 9 10 11 12 _______________________________________ ) ELIAS ILYIA, ) ) Plaintiff, ) v. ) ) MAROUN N. EL KHOURY, et al., ) ) Defendants. ) _______________________________________) No. C11-1593RSL ORDER DENYING DEFENDANT’S MOTION FOR SUMMARY JUDGMENT 13 14 This matter comes before the Court on “Defendant’s Motion for Summary 15 Judgment.” Dkt. # 129. After reviewing the memoranda, declarations, and exhibits originally 16 submitted, the Court found that there were genuine issues of material fact regarding motive and 17 capacity that had to be determined before one could decide whether defendant was a knight in 18 shining armor or a dastardly con-artist. Nevertheless, it was unclear whether plaintiff’s 19 interpretation of the events and evidence, even if accepted as true, would justify the various 20 forms of relief requested in the First Amended Verified Compliant. The Court therefore 21 requested supplemental briefing. Having reviewed the additional briefing and the original 22 submissions, the Court finds as follows: 23 24 25 26 ORDER DENYING DEFENDANT’S MOTION FOR SUMMARY JUDGMENT Dockets.Justia.com 1 A. 2 Declaration that the Durable Power of Attorney and the Stock Purchase Agreement were void ab initio Although there may not be evidence from which a reasonable jury could conclude 3 4 that plaintiff lacked sufficient mental capacity to understand the nature of the challenged 5 transactions, there is a genuine issue of fact regarding whether he was left to exercise his own 6 free will in the matter. See In re Estate of Lint, 135 Wn.2d 518, 535 (1998) (“[I]nfluence which 7 at the time of the testamentary act, controlled the volition of the testator, interfered with his free 8 will, and prevented an exercise of his judgment and choice” will void a will); Page v. Prudential 9 Life Ins. Co. of Am., 12 Wn.2d 101, 108 (1942) (quoting 17 C.J.S. Contracts § 133 for the 10 proposition that a contract will not be invalidated “[w]here a person possess sufficient mental 11 capacity to understand the nature of the transaction and is left to exercise his own free will”). If 12 plaintiff is able to show by clear, cogent, and convincing evidence that defendant controlled 13 plaintiff’s volition, interfered with his free will, procured agreement through undue influence, or 14 otherwise prevented an exercise of judgment and choice in signing the Durable Power of 15 Attorney and/or the Stock Purchase Agreement, the contracts may be avoided. 16 B. Invalidation of transfers of funds, personal property, and businesses for fraud 17 Taking the evidence in the light most favorable to plaintiff, a reasonable jury could 18 find by clear, cogent, and convincing evidence that defendant engaged in fraud in order to obtain 19 control of plaintiff’s money and businesses. In particular, plaintiff has provided evidence that 20 defendant falsely asserted that there was an assassination plot against plaintiff and his wife, that 21 plaintiff’s wife was cheating on him, and that the businesses were in danger of being shuttered, 22 that defendant knew these assertions were false (or at least grossly exaggerated), that he made 23 these misrepresentations for the purpose of isolating plaintiff and increasing his dependence on 24 defendant, that defendant intended to induce plaintiff’s reliance, and that, given the 25 circumstances, plaintiff justifiably relied to his detriment. See In re Estate of Lint, 135 Wn.2d at 26 ORDER DENYING DEFENDANT’S MOTION FOR SUMMARY JUDGMENT -2- 1 533-35. If plaintiff is able to establish the nine elements of his fraud claim, he would be entitled 2 to recover damages compensating him for his losses, including the amounts distributed at 3 defendant’s behest to defendant’s wife and sisters. 4 5 C. Breach of fiduciary duties Plaintiff argues that a fiduciary duty arises “whenever one man trusts in and relies 6 upon another.” Supplemental Memorandum (Dkt. # 172) at 9 (quoting U.S. v. Reed, 601 F. 7 Supp. 685, 707 (S.D.N.Y. 1985)). Plaintiff offers no reason to suspect that Reed’s analysis of 8 what constitutes the functional equivalent of a fiduciary relationship under New York law would 9 be accepted here in Washington. In fact, Reed’s “expansive construction of relationships of trust 10 and confidence” was limited in U.S. v. Chestman, 947 F.2d 551, 567-69 (2nd Cir. 1991), which 11 noted that more than the gratuitous or unilateral reposal of trust in another is required to establish 12 a fiduciary relationship or to impose fiduciary duties on the recipient. 13 Participants in a business transaction in Washington generally deal with each other 14 at arm’s length, having no particular duty to disclose facts nor any particular right to rely on the 15 statements of the other party. Liebergesell v. Evans, 93 Wn.2d 881, 889 (1980). “A simple 16 reposing of trust and confidence in the integrity of another does not alone make of the latter a 17 fiduciary. There must be additional circumstances, or a relationship that induced the trusting 18 party to relax the care and vigilance which he would ordinarily exercise for his own protection.” 19 Moon v. Phipps, 67 Wn.2d 948, 954 (1966). In some instances, a fiduciary relationship arises as 20 a matter of law because the nature of the relationship – such as that between an attorney and 21 client, a guardian and ward, or a trustee and beneficiary – is such that the principal is entitled to 22 expect that his welfare will be protected. See Annechino v. Worthy, 175 Wn.2d 630, 636 23 (2012); McCutcheon v. Brownfield, 2 Wn. App. 348, 356-57 (1970); Restatement (First) 24 Contracts § 472, cmt. c. A fiduciary relationship may also arise as a matter of fact where one 25 party has superior knowledge and uses that knowledge to induce reliance by the other party. 26 ORDER DENYING DEFENDANT’S MOTION FOR SUMMARY JUDGMENT -3- 1 Retired Pub. Emps. Council of Wash. v. Charles, 148 Wn.2d 602, 622 (2003). In Liebergesell, for example, an unsophisticated widow with no business 2 3 experience was encouraged by an acquaintance to invest money in his business of buying, 4 renovating, and selling old houses. The widow stated that she relied upon defendant for 5 investment advice, including how the investment should be structured, that defendant knew of 6 and encouraged her reliance, and that she regarded defendant as a financial counselor and guide. 7 Defendant ultimately took advantage of her trust. The Washington Supreme Court found that, 8 taking the facts in the light most favorable to the widow, the circumstances were sufficient to 9 raise a question of fact as to whether a fiduciary relationship existed, precluding summary 10 judgment. The same result applies here. If plaintiff is able to prove his case, including the 11 allegations that defendant claimed he had the ability to protect plaintiff from harm and alleviate 12 his personal/professional problems and that defendant encouraged plaintiff to rely on him to help 13 him with those issues, a fiduciary relationship may have arisen under Washington law. If, in 14 fact, the parties had such a relationship and the plaintiff was justified in expecting that defendant 15 would care for his interests, a breach of that duty would be sufficient to warrant rescission and 16 cancellation of transactions by which defendant benefitted at plaintiff’s expense. See Moon, 67 17 Wn.2d at 955.1 18 19 20 21 22 1 23 24 25 The Court finds that most of plaintiff’s other arguments regarding potential sources of defendant’s fiduciary obligations do not, in and of themselves, establish that a fiduciary relationship existed at law or in fact, although they are certainly relevant to the disputed factual issue. To the extent plaintiff’s grant of durable powers of attorney to defendant establishes a fiduciary relationship as a matter of law, plaintiff has not shown that the powers were abused to his detriment. 26 ORDER DENYING DEFENDANT’S MOTION FOR SUMMARY JUDGMENT -4- 1 2 3 D. Wrongful conversion of plaintiff’s funds, personal property, and shares of his corporations Plaintiff claims that he paid defendant $3.7 million in order to buy protection from 4 an assassination attempt, but that defendant converted the money to his own personal uses. 5 Under Washington law, conversion is the act “of willfully interfering with any chattel, without 6 lawful justification, whereby any person entitled thereto is deprived of possession of it.” PUD of 7 Lewis County v. WPPSS, 104 Wn.2d 353, 378 (1985). Money may be the object of a 8 conversion claim if it is wrongfully received by defendant, or if defendant is under an obligation 9 to return the money to plaintiff. Westview Inv., Ltd. v. U.S. Bank Nat. Ass’n, 133 Wn. App. 10 835, 852 (2006). “Wrongful intent is not an element of conversion:” defendant is not relieved 11 from liability simply because he believed his possession was rightful. Brown ex rel. Richards v. 12 Brown, 157 Wn. App. 803, 817-18, 820 (2010). 13 Defendant argues that he cannot be liable for conversion because he never 14 received delivery of the $3.7 million and does not have possession or control over the money. If 15 actual physical possession of the funds were required, conversion would rarely be proven: very 16 few monetary transactions involve the transfer or continued possession of cash. The fact that the 17 funds are actually held by a bank or other third-party has never been found to defeat a claim for 18 conversion. Rather, a conversion claim may proceed regardless of whether defendant has actual 19 or constructive possession of the goods. See Bickford v. Hupp, 83 Wash. 427, 428-29 (1915). 20 Thus, if defendant has constructive possession of the funds (i.e., the ability to obtain custody, 21 control, or possession of them), a conversion claim will lie. A reasonable jury could find that 22 defendant, who orchestrated the transfer of funds to his wife’s account in another country, has 23 constructive possession of those funds. 24 Finally, defendant argues that plaintiff may not pursue a conversion claim because 25 26 ORDER DENYING DEFENDANT’S MOTION FOR SUMMARY JUDGMENT -5- 1 he has not made a demand for the return of the $3.7 million. In Judkins v. Sadler-MacNeil, 61 2 Wn.2d 1 (1962), the case on which defendant relies for the demand-requirement argument, 3 plaintiff voluntarily and by agreement delivered his truck to defendant. At a later point, plaintiff 4 attempted to retrieve personal belongings that had been left in the vehicle: his demands for 5 access were rebuffed. In summarizing the trial court’s findings, the Supreme Court noted “that 6 the basis for recovery, if any, was the defendants’ refusal to deliver to the plaintiff his personal 7 belongings after demand therefor.” Judkins, 61 Wn.2d at 4. That a demand had been made was 8 not surprising given the circumstances. The original transfer of the property to defendant was in 9 no way wrongful: until plaintiff put defendant on notice that return was necessary, defendant’s 10 conduct was wholly justified. While it is possible that, in circumstances like that presented in 11 Judkins, a demand may be necessary to establish a “willful interference with chattel, without 12 lawful justification,” it is not a separate element of the cause of action. Where, as here, the 13 original receipt of the funds by defendant is alleged to have been the result of fraud and undue 14 influence, a demand is unnecessary to establish the lack of lawful justification. 15 16 For all of the foregoing reasons, defendant’s motion for summary judgment is 17 DENIED. The parties shall confer regarding a trial date for the above-captioned matter and 18 contact chambers at 206-370-8810 to obtain an amended case management schedule. 19 20 Dated this 27th day of September, 2013. A 21 Robert S. Lasnik United States District Judge 22 23 24 25 26 ORDER DENYING DEFENDANT’S MOTION FOR SUMMARY JUDGMENT -6-
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